Economix

The Economic Impact of the Pill

By ANNIE LOWREY

March 6, 2012

The recent controversy over contraception and health insurancehas focused on who should pay for the pill. But there is a wealth of economic evidence about the value of the pill – to taxpayers, as my colleague Motoko Rich writes, as well as to women in general.

Indeed, as the economist Betsey Stevenson has noted, a number of studies have shown that by allowing women to delay marriage and childbearing, the pill has also helped them invest in their skills and education, join the work force in greater numbers, move into higher-status and better-paying professions and make more money over all.

One of the most influential and frequently cited studies of the impact the pill has had on women’s lives comes from Claudia Goldin and Lawrence F. Katz. The two Harvard economists argue that the pill gave women “far greater certainty regarding the pregnancy consequences of sex.” That “lowered the costs of engaging in long-term career investments,” freeing women to finish high school or go to college, for instance, rather than settling down.

The pill also helped make the marriage market “thicker,” they write. By decoupling sex from marriage, young people were able to put off getting married and spend more time shopping around for a prospective partner.

Those changes have had enormous impacts on the economy, studies show: increasing the number of women in the labor force, raising the number of hours that women work and giving women access to traditionally male and highly lucrative professions in fields like law and medicine.

A study by Martha J. Bailey, Brad Hershbein and Amalia R. Miller helps assign a dollar value to those tectonic shifts. For instance, they show that young women who won access to the pill in the 1960s ended up earning an 8 percent premium on their hourly wages by age 50.

Such trends have helped narrow the earnings gap between men and women. Indeed, the paper suggests that the pill accounted for 30 percent – 30 percent! – of the convergence of men’s and women’s earnings from 1990 to 2000.

Interestingly, the study also found that the pill had the greatest economic benefits for women with average IQ scores. “Almost all of the wage gains accrued to women in the middle of the IQ distribution,” the paper said. For this group, it said, women with early access to the pill “enjoyed greater hourly wages throughout their twenties and the premium grew to a statistically significant 20 percent at ages 30 to 49.” Why? The pill helped “middle ability” women in “planning for and opting into paid work,” the researchers theorized.